Nippon Steel Deal Tests US–Japan Friendship

Commentary

“Countries have no friends … just interests”—or so goes the paraphrased version of Lord Palmerston’s statement.

That was so cynical—so 19th-century British Empire.

But 170 years later, try buying another nation’s steel company, and you might think Lord Palmerston was right.

Japan’s largest steel company, Nippon Steel, wants to acquire U.S. Steel—many decades ago, it was a veritable symbol of American industrial might and technological prowess, but less so these days.

President Joe Biden opposes the deal, despite touting the strength of the U.S.–Japan alliance in his latest summit meeting with former Japanese Prime Minister Kishida, describing it as rock solid and based on shared mutual values.

The decision to approve or reject the deal has been pushed back until after the November election.

Former President Donald Trump is also against the deal, as is vice presidential candidate Sen. JD Vance (R-Ohio).

One might get the impression from the rhetoric that the end of the republic is nigh if “foreigners” get their hands on U.S. Steel.

The main reason given is national security.

It’s prudent that a country closely watches its key industries—and who owns them.

But maybe the biggest issue with the U.S. Steel deal is that it’s embarrassing.

People are nothing if not tribal. And who doesn’t want the “home team” to succeed—and on its own?

It’s also an embarrassing reminder that America’s business and political elites tossed away the country’s manufacturing dominance over the last five decades—shipping much of it overseas.

But a little embarrassment is sometimes useful if it helps you improve.

And this is a deal where swallowing one’s pride is worth it.

For one thing, the Japanese are our friends. And Nippon Steel’s proposal is not unprecedented.

Mitsubishi UFJ Financial Group (MUFG) wrote a $9 billion check to save Morgan Stanley, the American financial icon and a key player in global capital markets, in 2008 when it was within hours of collapse.

Morgan Stanley got a new lease on life; the Japanese got a good investment while becoming the bank’s largest shareholder. And it has worked out well for both sides.

The Japanese, in effect, did this as a favor to the Americans. They could have let the Wall Street firms collapse owing to the irresponsibility of their own making—and stepped into profit. They didn’t.

But does letting foreign entities own a U.S. company put us at risk?

That depends on which foreigners are involved and/or the particular deal.

In this case, Japan is a longtime ally—and an excellent partner—and the deal benefits both nations.

Japan’s existence as an independent country depends on the United States and the U.S. military.

And Tokyo knows that very well.

A weak America is dangerous for Japan.

Investing in U.S. Steel and modernizing it will create great-paying jobs in the United States. Still, more importantly, it will secure a strategic asset that the United States has neglected, which serves as an insurance policy for the survival of Japan.

Opponents haven’t produced a believable scenario where Nippon Steel would (or could) shut down U.S. steel production—and create a political brouhaha that endangers the essential U.S.–Japan relationship and defense coverage.

As importantly, Japanese investment has been good for the nation.

Toyota, Nissan, and Honda are just the most well-known Japanese companies in the United States, and they support over 450,000 manufacturing jobs in the country.

Japan is the leading overall foreign investor in the United States, including huge research and development operations.

The litmus test: Americans want to work for Japanese companies, and union organizers have a tough time convincing them they are unhappy.

Does anyone remember the 1980s when Japan and its companies were demonized on Capitol Hill and elsewhere?

We were all destined to become Japan’s slaves as it destroyed and took over our economy—and our country.

Not hardly.

But this sounds like what’s being said will happen to American workers if Nippon Steel takes over U.S. Steel—lose jobs, pensions, everything.

Less publicized is that actual U.S. Steel employees support Nippon Steel’s investment in modernizing their operations and making it a stronger company.

China Ties?

Listen to deal opponents, and one would think Nippon Steel is conspiring with China to destroy a U.S. company.

Like many other companies, Nippon Steel has business dealings in China.

These should be carefully and accurately assessed for real security risks, not shaded to keep the United Steelworkers union bosses happy.

If necessary, Nippon Steel should be required to modify or even end any China operations.

And so should Boeing, General Electric, Ford, GM, Tesla, Honeywell, and the hundreds of other American companies in the China market that have done far more than Nippon Steel to build up the Chinese economy and the People’s Liberation Army over the last four decades.

Remember the Chinese spy balloon that flew over the United States in 2023? The White House likely won’t release a report on what it found because the balloon’s “innards” had American components.

Is Racism a Part of Opposition to the Deal?

Probably.

One doubts we’d be having this debate if a British company was looking to buy U.S. Steel.

And there is an air of “Yellow peril” in some of the commentary.

A few years ago, when it appeared Renault would take over Nissan, company executives and Japanese government officials effectively took Nissan Chairman Carlos Ghosn hostage via charges of corporate misconduct—along with a senior executive, Greg Kelly, an American.

Both the United States and Japan need to remember they are friends, avoid dredging up resentments, and stay focused on defending themselves.

Use the Japanese to Help Make US Steel Great Again?

This won’t be the first time.

American automakers in the 1970s and 1980s were losing billions and turning out shoddy cars nobody wanted to buy. Just look up “K-Car” on the internet.